Tag Archives: technology clusters

Planning for the digital economy

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The digital tech sector is the UK’s fastest growing sector.    Recent statistics show that it is growing as much as 50% faster than the wider economy.  In London alone, a new tech business starts up every hour.  Beyond London, digital tech clusters across the country are driving the economic resurgence of many cities and city regions.

The rapid growth of the sector means that its spatial footprint has become increasingly evident in towns and cities across the UK.  In May, the Royal Town Planning Institute (RTPI) published guidance on how town planning can respond to and guide the future development of the digital economy.  It makes recommendations for planners in two areas:

  • how to encourage the growth of the tech sector in their local area; and
  • how to make best use of the opportunities provided by the tech sector for the planning system

What is the tech sector?

The digital tech sector is increasingly diverse, and there is no straightforward definition.  The 2016 Tech Nation report identified 16 different sectors, some of which include:

There are currently around 58,000 active digital tech businesses in the UK.  It employs 1.64 million people, and job growth is more than double that of other sectors.  Roles are generally highly skilled and well paid, compared to other sectors.  Indeed, the average salary is 44% higher than the national average!

Location preferences

Digital tech, as a sector, thrives off well-planned spaces with access to good local infrastructure.  Tech firms and their employees tend to prefer easily accessible, walkable, multi-use districts. This results in the creation of ‘clusters’ of similar firms in central urban locations.

Clustering has a number of advantages for digital tech businesses – including easy access to large talent pools and the ability to network and exchange ideas face-to-face with local, likeminded businesses and employees – a key driver of innovation.

London, Manchester and the Greater South East have some of the largest digital tech clusters in the UK; however, the Tech Nation 2017 report mapped 30 significant clusters across the length and breadth of the UK – from Dundee to Exeter.

Facilitating the growth of the sector

The recent growth of the sector has already led to a number of economic policy responses, including the development of enterprise zones, innovation and business centres, and ‘innovation districts’.  The RTPI guidance also highlights a number of smaller-scale responses that can be utilised to attract and foster tech industry growth, including:

  • ‘de-risking sites’ by making sure that planning requirements are “practical, clear and known in advance of specific proposals coming forward”
  • using public money for assembling and servicing sites that are more challenging
  • the provision of Wi-Fi in specific locations
  • making districts pedestrian and cycling friendly
  • leveraging Public Private Partnership models to build digital infrastructure

In addition to these responses, the RTPI makes three recommendations for planners on how they can create an environment that is attractive to digital tech firms.

First, it suggests that planners should monitor the local economy to get a sense of what local growth industries are.  Policies can then be adapted to local economic conditions.  Some local authorities already do this using company registration data.  For example, Camden Borough Council use this data to inform a quarterly ‘Business and Employment Briefing’.  It covers a range of measures, including business size and type, employment in the borough, commercial property, unemployment, worklessness and qualifications.

In order to attract and assist the growth of the digital tech sector, it is important for local planning teams to have a proper understanding of the sectors’ spatial preferences.  This is particularly important when drawing up local plans.  Therefore, the second recommendation made by the RTPI is that local authorities should employ someone to engage with local tech firms to find out how planning could help to better facilitate their growth. The roles of The Dublin Commissioner for Startups and the Amsterdam Chief Technology Officer are potentially interesting models for this.

Third, the RTPI recommends ensuring that there is sufficient housing, office space and transport infrastructure to meet capacity.  These three elements are the “fundamental ingredients for an economically and socially successful city”.  Without them, no amount of other interventions will attract firms to an area.

The Tech Nation 2017 report found that 30% of digital tech community members cited their local transport infrastructure as a ‘business challenge’.  Tech London Advocates report similar concerns, whilst also highlighting the challenges posed by digital infrastructure: “It has become increasingly clear that a fundamental challenge facing tech companies in London is infrastructure. The tech sector has grown so fast that the provision of office space and digital connectivity is having to play catch up”.

The digitisation of planning

The growth of the digital tech sector not only creates jobs and generates wealth; it creates opportunities for improved efficiency in other sectors too.  In planning, digitisation can free up time and resources, and create new tools for planners to utilise.  From the adoption of  geographic information system (GIS) software for mapping, to experimental trials of 3D modelling software and virtual reality in plan making and community engagement, technology has and continues to present a number of opportunities to improve the planning system.

Beyond planning, innovations in the digital tech sector aid the creation of ‘smart cities’ – where information and communication technology (ICT) and ‘Internet of Things’ (IoT) technologies are integrated to manage cities’ assets, with the overall aim of improving efficiency.  Examples of potential usage vary considerably, from supporting people with disabilities or chronic illnesses, to the provision of real-time traffic data, controlling streetlights and monitoring environmental data.

As such, a final recommendation made by the RTPI is to make use of local firms’ skills and resources to address cities’ infrastructural challenges.

Addressing inequality

Despite the rapid growth of the digital tech sector and its contribution to job and wealth creation, there is an increasing recognition that the benefits created by the sector can be insular and often do not spill over to the local economy.

Indeed, studies have found that the higher the share of tech employment in a city, the more income inequality there is.  On this basis, the digital tech sector has been criticised for its potential to create a ‘two-tier economy’.  There are also concerns about the gentrifying effects of digital tech clusters on local areas.  In London, for example, tech growth has increased the cost of living in some parts of the city, displacing smaller firms and lower income families.  It also poses a potential threat to innovation as startups are priced out of successful digital tech clusters.

Clearly addressing these issues poses some significant challenges for policymakers.  Last year, the RTPI made a number of recommendations in this regard, including helping local people to develop the skills needed by local tech companies.

Successful planning

The digital tech sector has enormous potential to enhance economic growth.  Through its ability to create the optimal conditions for the digital tech sector to thrive, planning can help to encourage this growth.  Understanding local economic trends, consulting with digital tech businesses about their needs, and ensuring that local infrastructure has the capacity to meet these needs, are vital to successful planning for the digital tech sector.  At the same time, ensuring that this growth is sustainable and benefits wider society are key challenges for planners.

The UK digital economy: how can the government support digital businesses?

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By Steven McGinty

Last month, the House of Commons Business, Innovation and Skills (BIS) Committee launched an inquiry into the UK’s digital economy. Iain Wright MP, the Chair of the Committee, explained that:

“Digital technology is rapidly changing the economic landscape in which firms operate. Nothing short of a digital and tech revolution is taking place, with new entrepreneurs and business models emerging and existing businesses having to adapt quickly to keep pace.”

The inquiry will focus on three areas:

  • Government actions affecting businesses in the digital economy;
  • how to maximise the opportunities and overcome challenges in the sector;
  • how the sector can contribute to improving national productivity.

The BIS Committee is asking for submissions from those involved in the digital economy, including digital businesses and companies hoping to benefit from technology.

 Why should the government support the digital economy?

Innovate UK expect that, by 2015, the UK digital economy will account for 10% of GDP. Tech City UK report that the sector employs 1.5 million people (about 7.5% of the total workforce); although this is expected to increase by 5.4% by 2020. In 2013-2014, 15% of all the companies formed were digital businesses. Most were based outside of London (74%) and nearly all were SMEs (98%). The majority (90%) of digital companies expect revenues to grow within the next year.

Technology clusters

Technology clusters play an important role in the UK’s digital economy. There are 21 clusters across the UK, with expertise ranging from software development to marketing and advertising. The majority of digital businesses consider themselves part of a cluster (65%). Bournemouth has the fastest growing digital cluster, with a 212% increase in the number of companies formed since 2010. Its specialism is digital marketing and advertising.

This growth suggests specific focus should be given to technology clusters. Tech City UK found that a third of digital companies highlighted access to funding as a challenge, particularly outside of London and the South East.  One suggestion offered by Tech City UK is that businesses need to take advantage of European funding where possible.

Other forms of support could include: providing fast and accessible broadband; access to a pool of skilled employees; suitable workspace, particularly in the South East; and business and mentoring advice.

Digital Economy Strategy 2015-2018

At the beginning of the year, Innovate UK set out a strategy to support UK businesses in getting the most out of digital technology. It sets out five main objectives:

  • Encouraging digital innovators
  • Focusing on the user
  • Equipping the digital innovator
  • Growing infrastructure, platforms and ecosystems
  • Ensuring sustainability.

Within the strategy, actions are put forward for how these goals will be achieved. For instance, to ensure sustainability, Innovate UK would work closely with UK research councils to encourage cross-disciplinary academic collaboration and help connect it to real-world business needs. If even some progress is made with each of these objectives it would be hugely beneficial for the UK digital economy.

Innovation centres – the Digital Catapult

The Digital Catapult is a national centre that aims to accelerate the UK’s best digital ideas to the marketplace, in order to create new products, services and jobs. It was established in 2014 by Innovate UK and is based in the Knowledge Quarter in Kings Cross. There are also three local centres in the North East and Tees Valley (NETV), Brighton, and Yorkshire.

The Digital Catapult centres focus on the challenges associated with: closed organisational data; personal data; creative content; and the internet of things (IoT). The centres are involved in a number of projects, including IoTUK, which has been launched as part of a £40 million government investment in the internet of things (the use of networks to allow the exchange and collection of data from everyday objects, such as fridges). The programme aims to increase the adoption of high quality IoT technologies and services throughout business and the public sector.

Regina Moran, CEO at Fujitsu UK&I, notes that:

“The IoT has the potential to turn ideas in a hyper-connected world into fully realised digital services but it has challenges ahead and it’s encouraging to see the Government investing in its development.”

 Regulation

The Prime Minister, David Cameron, has managed to convince the European Commission (EC) to review the VAT regime for tech start-ups, arguing that it punished British entrepreneurs. The regime, which was implemented in January, forced companies to pay tax in every country they traded in rather than their headquarters. It also eliminated a £81,000 threshold for which companies have to register for VAT duty.

However, the Commission has recognised that this was adversely affecting small businesses. Therefore, measures such as the reintroduction of the VAT threshold and a single registration scheme for cross-border taxes, will be included in the Commission’s consultation.

The UK government’s approach shows a commitment to providing a competitive business environment and a single European market in digital services. It’s likely that most digital businesses would support the government’s approach.

Concluding remarks

The upcoming BIS Committee inquiry will provide an opportunity to reflect on the government’s approach so far. Although evidence confirms that the digital economy has been growing, there may be areas that the UK is failing to capitalise on. In a highly competitive globalised economy, it’s important that the UK exploits any strategic advantage, ensuring that innovative ideas are brought to the market quickly.

The inquiry will also provide an opportunity for a dialogue between the government and the private sector. This increased collaboration can only be good news for the UK’s digital businesses.

Here at Idox, we take an active interest in the future of the digital economy and eagerly await the Committee’s findings.

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